Every ophthalmologist who hears about a management services organization eventually asks the same question. How is this different from private equity?
It's a fair question. The language sounds similar. Someone acquires the practice, someone else handles the operations, and the physician keeps seeing patients. The pitch from PE groups and the pitch from MSOs can sound almost identical in a first conversation. The differences aren't in the words. They're in the contracts, the capital structure, and what happens in year 3.
PE Has a Clock. A Permanent Hold Company Doesn't.
The most important structural difference is the exit timeline. PE firms operate under fund mandates that require them to return capital to their limited partners within a fixed period. PitchBook data analyzed by Cherry Bekaert in their 2025 Private Equity Report found the median PE holding period hit an all time high of 7 years in 2023 before declining to 5.9 years in 2024. PE firms currently hold over 28,000 unsold assets, with 40% held longer than 4 years.
FOCUS Investment Banking noted in their 2024 ophthalmology update that most PE ophthalmology platforms were formed in 2018 and 2019 and are now approaching the end of the typical 5 to 7 year hold period. Most are still held by their founding PE sponsor. The exits are coming.
A permanent holding company doesn't have limited partners. It doesn't have a fund timeline. There's no year 5 board meeting where someone asks "what's our exit multiple?" because there is no exit. The company acquires, operates, and holds. The physician's management services agreement stays with the same counterparty indefinitely.
That distinction shapes every decision that follows. A PE group optimizes for the next sale. A permanent hold company optimizes for long term cash flow and operational stability because that's the only thing it benefits from.
What Happens When PE Sells
A 2025 study published in JAMA Health Forum tracked what happens to physicians when PE firms sell their practice investments. The researchers found that physicians in PE exiting practices were 16.5 percentage points more likely to leave within 2 years of the sale compared to matched controls. They were also 10.1 percentage points more likely to join large practices of 120 or more physicians. Notably, 74% of the PE exits studied were sponsor to sponsor flips, meaning the physician's practice was sold from one PE fund to another.
The physician signed up to work with one group. They ended up working for a different group that they never met, never evaluated, and never agreed to. The MSA got transferred. The management team changed. The operational priorities shifted. And the physician's only option was to stay under new terms they didn't negotiate or leave and trigger their non-compete.
An MSO that operates under a permanent hold structure doesn't sell. The management services agreement can include an explicit anti-PE assignment clause requiring the physician's written consent before the MSA can be transferred to any PE backed entity. That clause isn't a handshake. It's a binding legal provision in the contract.
The EyeCare Partners Example
EyeCare Partners, the largest medically focused eyecare platform in the country with over 700 locations across 18 states, required an emergency debt restructuring in April 2024. The company had been acquired by Partners Group for approximately $2.2 billion in 2019. By 2024, the company carried $2.1 billion in first lien and second lien term loan debt and required $275 million in new super priority financing just to maintain liquidity. Maturities were extended to 2027. Moody's had previously assigned a B2 rating, which is deep junk territory.
A peer reviewed study tracking 14 PE backed eye care groups from March 2017 to March 2022 found that debt valuations across these groups decreased 0.46% per quarter on average. By March 2022, 40.5% of all practice locations associated with these groups, 1,213 of roughly 2,997, had discounted debt valuations. That's a structural pattern across PE backed eye care as a category.
The physicians in those practices didn't take on that debt. They didn't approve the leverage ratios. They didn't choose the capital structure. But they're the ones who show up on Monday morning and see patients in a practice whose parent company is in financial distress.
The Physician Satisfaction Data Is Clear
Bain and Company's Frontline of Healthcare Survey, published in October 2024, found that physicians at physician-led practices have net promoter scores 25 to 40 points higher than those in health system-led organizations. Physicians at system led practices are almost 3 times more likely to be dissatisfied. And nearly 25% of physicians in health system led organizations are considering switching employers, compared to 14% in physician led ones.
An ACP survey published in JAMA Internal Medicine in March 2024 put a finer point on it. Only 44.8% of PE employed physicians said they were likely to remain with their current employer. That compares to 77.8% of non-PE physicians. Overall, 60.8% of physicians surveyed view PE involvement in healthcare negatively and 52% view PE ownership as worse than independent ownership.
These numbers aren't about individual PE firms being poorly managed. They're about a structural misalignment between how PE capital works and what physicians need from a practice environment. The fund needs growth and an exit. The physician needs stability and autonomy. Those two things conflict at a fundamental level, and the conflict shows up in every satisfaction metric available.
How the MSO Model Is Different in Practice
In a correctly structured MSO model, the physician owns the professional corporation. The MSO owns the non-clinical assets and provides management services through a written agreement. The MSA fee is fixed monthly. It doesn't vary with revenue, patient volume, or clinical outcomes. The physician retains full clinical decision making authority because the MSO is legally prohibited from directing medical care under state corporate practice of medicine laws.
The physician can terminate the relationship. There's no equity rollover locking them in. There's no non-compete tied to future locations that don't exist yet. The management support continues because both sides benefit from it, not because one side has contractual leverage over the other.
The question isn't whether management support is valuable. It obviously is. The question is who holds the power in the relationship and what happens when interests diverge. In a PE structure, the fund holds the power and the physician is a cost center. In a physician owned MSO structure, the physician holds the clinical entity and the MSO holds the operational responsibility. The interests stay aligned because neither party benefits from the other one failing.
That's the difference. Not the pitch. The contract.
This article is for general educational purposes and is not legal or financial advice.
Verdira is a healthcare acquisition platform focused on ophthalmology practices. Physician ownership. Transparent structure. No volume quotas. If you've been through a PE acquisition or are evaluating one, we're open to conversations about how different models work.
Contact info@verdira.com | 307-381-3734 | verdira.com
